tv Squawk on the Street CNBC June 28, 2017 9:00am-11:01am EDT
in the dark coin the $2 tonnie is the first of its kind entered into circulation. i want one. >> cool. that's cool. >> okay. michelle, thanks for hanging out. >> see you tomorrow. >> we'll see you tomorrow. make sure you join us tomorrow squawk on the street begins right now. >> good wednesday morning. welcome to squawk on the street. mike santolli at post nine stocks looking to recover some of yesterday's spill as we watch fall out from the senate health care vote delay. results after the bell tonight euro dips on headlines the ecb saw the market as misinterrupting draghi's speech on tuesday goldman turning bearish on health care were calling chances for a broad reform unlikely.
>> plus the dow and s&p were set to rebound from what was the worst session since mid may. >> despite an improving ipo pipeline blue apron ahead of the nysc debut tomorrow. >> senate republicans hoping to get a vote on the health care bill after the july 4th recess that fols the decision to postpone a vote amid gop senators passage of a trump care bill seems unlikely due to political obstacles. goldman says quote estimates of the potential increase in the uninsured population seem unlikely to improve even after revisions to the bill. public support is weak and divisions appear to pose too many obstacles people trying to make arguments what could bridge some of these divides. more help for opioid addiction but others argue it's just too wide. >> they're pushing back on it, anything comprehensive that
would represent an overhaul of the aca and it's funny because it's echos more reasons to talk about tax reform too we're not going to get a big comprehensive reform package so it's interesting. obviously the process is going to play out and it seems like mitch mcconnell left a lot of room in there. a lot of play for whatever has to be done. >> it doesn't add confidence to investors. especially those banking on tax reform as part of the optimism surrounding the trump agenda and what that might mean for the markets. the next steps are they can win over two different factions of their own party. the republicans that is. the moderates that say that the limits to medicaid are going to hurt their individual states
and then they have a harsh take on the state of bipartisanship in this country. this will produce a blossoming of bipartisanship. everyone can sit down in the middle and workout a compromise. it's a lovely thought. >> health care stocks remain very well. you had new buy ratings today. it's almost whatever sorts out here they're going to find a way. >> and there does seem to be an argument to be made that the prospects for tax reform are no longer figuring into investors view of the overall market we sat at this desk for months talking about health care and the fact that tax reform seems to be fading more and more as a real possibility when i say reform i mean the true multitude of different changes to the tax code that
would really actually represent reform it's still possible as we said many times and when i speak to people close to this and watching it we end up with some sort of a tax cut or repay triyags deal but that seems less and less likely given what's going on in health care but those expecting reform and the border adjustment tax and the non-deductibility of interest it's hard to matter at this point but it doesn't figure into people's prospects if they look at a market. good morning, you know that piece on earth fantasy that's something that mitch mcconnell hinted about as a potential
nightmare and not a fantasy and the idea that republicans would be with democrats. he brought all the republicans over to figure out how they can get on the same page and where they go from here after the sen tors pulled the bill from the floor at least temporarily after the july 4th recess. here's the president striking a down beat note yesterday in the white house. >> we have to have health care and it can't be obamacare which is is melting down the other side is saying all sorts of things before they knew what the bill was. this will be great if we get it done and if we don't get it done it's going to be something that we're not going to like and that's okay and i understand that very well but i think we have a chance to do something very, very important for the public. >> and here's mitch mcconnel making that promise and or threat depending on how you look at it that republicans might be forced to deal with the other
side if they can't get their act together as a unit >> the status quo is unsustainable. it will be dealt with in one or two ways either republicans will agree and champion the status quo or my suspicion is any negotiation with the democrats would include neither reforms that we would like to make. >> he does not have that much wiggle room legislatively. we already saw susan collins in maine come out and say she doesn't think any tweaking of this bill could get her a vote so that leaves an open question as to how mitch mcconnell will get this bill passed through the senate if he does could they ever reconcile it with the bill over on the house side and get something into conference committee and send that to the president?
all of that unclear and also the time frame how long this will take and what it means for tax reform which republicans in the white house said they want to begin toward tend of september and have racked up this fall. all of these deadline versus been slipping throughout the year as the health care battle drags on and on. it's much tougher than a lot of republicans thought at the beginning of the year. >> thank you for setting it up for us this morning. warren buffet meantime slammed the house gop bill saying it favors the wealthy heres an interview tape last week that aired last night on the news hour getting a lot of play fnchts the bill that passed the house had been in effect this year i would have said $679,999 or over 17% of my tax bill there's nothing ambiguous about that i will be given a 17% tax cut and the people that's corrected at are couple with 350,000 or
more of income you can entitle this because i have friends where it would save them as much as -- it gets into the 10 million figure. >> warren buffet on the house version of the bill how it helped the wealthy interesting the opposition is not related to that point at all. >> no, he's referring there to the house bill those are $10 million in tax savings. >> that's big but he's only 600 and something thousand his taxable income is really small, right >> right. >> he doesn't sell any stock he just -- he doesn't even take a salary. >> that's on the investment income the 3.8% that would go away and also goes away into the senate bill. >> 679 that according to the interview would have cut his tax bill by 17%. >> right. >> which is a large number. >> he's been no fan of arguably
republican agendas or this particular bill for awhile. >> he doesn't believe this country and certainly wealthier people are overtaxed. >> we'll talk more about buffet later on this morning. these results could alter the size of ownership he has on a percentage basis of bank of america. we'll talk about that in a bit the dow and s&p looking to rebound on the worst session since mid may. and general mills benefitting from fewer promotions and expense con trols. got a dig there as well. >> expectations were low for this package food sector not experiencing growth so that negative 3% organic growth looked better than the estimates which were for negative 3.7. the margins were lower but the top and the bottom line, a lot of people were interested to see if this was going to be a kitchen sink kind of quarter
because it was the first under the new ceo. he said that there's some urgency to fix and turn around the sales problem that they have actually seen some improvement but the category that they're in, yogurt in particular has been very painful abroad cereal is still not growing and continues to decline they had some success when it comes to snacks but for this company and a lot of companies like it it's all about cost cutting and boosting the profitability and realigning the business structure to get more with the consumer. they made moves. they made cheerios gluten-free and bought annie's but they still haven't shifted the portfolio enough to get the top line growing again which is why they continue to be targets of activists. they continue to be targets of speculation and that's why some say their multiples are a little bit higher
>> where are we on operating margin with them organic revenues will be down 1 to 2% is what they're talking about but the focus whether it's in mondelez originally or nestl now focus as much as anything on nestle's margins being the key thing that can drive stock performance. gis also i suppose that's where a lot of investors are focused. >> it sbut it's also where a lot of the management has focused. they're all doing it here. >> it has. >> it doesn't take long to get to that fact and clearly this sit. >> margins are all coming at a
cost they're basically playing hard ball with no pricing so the consumer tapels has been strong but the food companies have not been helping at all. >> amazon is helping with that speaking of amazon the president tweeting a few seconds ago now about amazon the amazon washington post he calls it sometimes referred to as the guardian of amazon not paying internet tax which is they should is fake news this just hit a couple of moments ago. some discussion online of what he means specifically by that. >> he has made references to that in the past. >> every time they put up a distribution center in a particular state they begin to pay sales tax in those states. there are still perhaps a number of state where is amazon
customers are not paying sales tax. that is possible i think maybe that's what he is referring to although that has changed overtime again as their distribution network has needed it if you're in new jersey you're paying and new york you're paying. >> he wrote the washington post is owned by jeff besos for purposes of keeping taxes down at his no profit company amazon. >> he once called it a big tax shelter. >> they're completely separate things. >> he's the president now and what's interesting is everyone was wondering if he's going to keep targeting these dip cap tech companies i don't know are they going to have a regulatory problem. >> the change from his couch it was about $250 million if i recall maybe something along those
lines. correct me if i'm wrong. it has virtually no impact whatsoever on a man that's what the third richest man on the planet or close to it at this point. >> he clearly wants to tie them together tarnish amazon with a fake news brush. >> the blue apron ipo. the nasdaq back in the red for the month of june which does put it's 7 month win streak in some peril. more squawk on the street from post 9 in a minute hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades
new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. here at the big board with more what are you hearing >> that's right. blue apron this morning lowering it's price range now at $10 a share to $11 that's a 35% discount from the original range filed last week which is between 15 and $17 a share. it also means blue apron is looking to raise about $200 million less than it initially sought it also slashes the evaluation to about $2 billion from $3 billion as one ipo investor put
it to me this morning, this is the most dramatic cut he has seen in a very long time but i am also told that at this lower range, there should be enough demand to complete this deal i have also been speaking with a bunch of other sources on this those that are more familiar with the book building process and blue apron and it's bankers were not able to get enough investor demand at the original range. they were sceptical about the business model that entails sending a box of ingredients to customers homes they then cook themselves they're sceptical about the cost of acquiring new customers and nervous about the environment. not just with other company buts the looming tie up between amazon and whole foods there were a lot of inquiries about whether investors could short this thing early at the original price range and no matter which way you slice it blue apron had a difficult and expensive time obtaining and keeping it's customers so now
the question is whether shareholders will be more enticed by the $10 per share ipo than consumers are. >> the fundamentals don't necessarily cry out ringing by here at least the price they have been thinking about. average order values declined over the december quarter in march. orders per customer was down and average revenue per customer was down that's not exactly moving in the right direction although to be fair the top line is growing quickly. >> that's true a lot of investors questioned the timing they came out. they started their road show the next business day after the amazon-whole foods deal was announced. peel were wondering is that a signal they're trying to get out before things get worse here once they face more competition. it's a big question on their minds. >> leslie, thank you very much what a story this morning. when we come back we'll get analyst reaction to general mills earnings beat.
hey, i've got the trend analysis. hey. hi. hi. you guys going to the company picnic this weekend? picnics are delightful. oh, wish we could. but we're stuck here catching up on claims. but we just compared historical claims to coverages. but we have those new audits. my natural language api can help us score those by noon. great. see you guys there. we would not miss it. watson, you gotta learn how to take a hint. i love to learn.
watson, you gotta learn how to take a hint. our 18 year old wase army in an accident.'98. when i call usaa it was that voice asking me, "is your daughter ok?" that's where i felt relief. we're the rivera family, and we will be with usaa for life. >> let's bring in senior research analyst robert was there anything encouraging in here for investors? it was a top and bottom line beat but still negative sales trends in north america and in a lot of their categories. >> they did really well on cutting costs which a lot of them beat on the bottom line. >> so david asked earlier about the story. where did they sit relative to some of the other packaged food
and consumer product companies in terms of reducing the margins on cost cuts and how vulnerable does that make them for an activist or m&a or something to happen there >> so they're going along with the rest of these food producers and packaged food business and top line growth is hard to come by, especially when you're in the wrong areas where most of general mills business is and forcing through those cost cuts is really the only way that you can grow, to grow the bottom line so i'd say the rest of it. >> do they have any plan to grow the top line to turn around yogurt and cereal or diverse identify to try to get growth again >> that's a gret question. the new ceo somewhere focused on sales growth and guidance was a little bit higher than what the bottom expectations were for guidance but you're in the wrong
areas. yoplait yogurt and you're going without a greek option it's hard to compete and we saw that in the quarterly results. i'd like to see them focus on smaller acquisitions in the natural and organic category focus more on healthy snacks and then die vest tunds performing businesses to try to boost the top line growth going forward. >> where are you on the stock? >> so the stock is not expensive and it's not cheap it's about 17 or 18 times forward earnings the dividend is around 3.5% so that does limit some of the down side it's kind of just there. you have it, you might as well hold on to it for the income but i don't see a whole lot of upside in the stock from here. >> thank you for joining us. let's set to open up 1.25%. >> thank you. >> opening bell just 4.5 minutes aw ay
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>> the opening bet set to ring in 0 seconds the president of course tweeting about amazon and taxes watching for fall out on the health care vote delay the cyberattack. oil invenn toirs and then big bank report cards coming at 4:30 and potentially some modifications for whether or not buffet becomes the largest shareholder. >> that's fascinating. banks in general are against this corrected move in big tech. that's what happened yesterday you have all the big tech stocks down 4% or so off their highs. and it's the banks that have been rallying even before yields were going up and it's largely because of anticipating stress tests. we'll see if it can continue the coreography broke down a little bit. >> the big question is how much cash they'll be able to return
all 34 of them passed the stress test they have enough capital to absorb losses during extreme financial conditions so we can expect $79 billion in total to be returned in terms of did i have densd and buy backs we'll see. >> it's the opening bell here. at the bottom of your screen big board is tpg case holdings so the ipo today at the nasdaq, bio sciences specializing in the development of canabanoid based drugs. a lot of research today. you mentioned some of the initiations on aetna but also expedia at citi. morgan stanley resuming an open weight on gm. >> yeah. interesting because there's also some talk about how if you look at the very cheapest stocks based on price earnings multiples in the index which gm would be one of the very cheap thaes they look like value traps
so people are saying it's not all falling apart at once and we hit a soft part of the cycle. >> we believe the company holds some key cards in the area of product and technology but they have a limited window of opportunity to secure long-term success. >> we're just talking about the food companies that are allocated in the legacy business they have to get new car companies are in the same situation. old line tech in the same situation. can you incorporate the new and take advantage of what you have. it's a tall hill to climb up. >> you mentioned bank of america is one of the best right now a 6% yield if they're able to increase the dividend as is
expected to at least 44 cents a share i believe it is the result from him converting would be higher in terms of capital return than the 6% yield and welcome the shareholder in wells fargo and bank of america so it's numbers 2 and 3 in terms of banks in the country he also made a fortune on the warrants he had. originally he bought at something like $7 or something like that. >> might have been or was that during the crisis? >> and ge. he makes a very favorable investme investment. >> only buffet could get those deals as we pointed out at the time. >> that could be interesting to watch into the stress test results after today he they passed in terms of the
financials last time but there is a qualitative part but it's interesting to see if it highlights around and like senator elizabeth warren. >> speaking of we had the yellen comments yesterday and everybody repeating the line about not in our lifetimes. today it's draghi and the euro and the market got the speech long and he was never intending to direct his thinking and set the market up for a decision later in the year. >> they wouldn't walk back their comments when they saw the euro and trying to tamp it down. >> he probably wasn't trying to do it was just noting that
conditions are better. >> it's the position that he is in he clearly wants to have it moved to the next phase or at least be ready for it when it happe happens. >> so now they put out people familiar with the matter to walk back high as 11388 and then pretty much gave up all of it gains what's interesting yesterday is we saw this move higher in rates, interest rate across the board. but the ten year yield shot up where it was earlier this week and start seeing better conditions and signs that inflation is coming even though that's been ify. we're seeing the two year yield in the u.s. and pressure risk pop so we're making some new highs and that's been a driver
of stock market action as well it theps banks as you mention. >> that's all one trade. that global yield lift it got a quick unwind. >> there we go now we're back down. >> exactly. >> look at shares of nestle significant buy back or expects to in other words buy more of it in 19 and 20. that's 2019 and 20 than right now because of value creating acquisitions that raised questions for investors wondering what nestle has in mind particularly after not that long ago back in
february the ceo discussed acquisitions in a very different light saying they're not for its part third point counts to be a large shareholder. it does make a top ten shareholder. it's a $3.5 billion decision they are focused on capital structure. leverage would be gained in terms of increasing your operating margins taking what they're calling $2.5 billion in cost out of that business. and fairly peaceful between lobe and management at nestle. >> it's part of the appeal of buy backs.
and that's always the story that you're not committed to it and you can take it as it goes and i think when you were initially talking about this story did seem as this third point saw which way the wind was blowing on nestle and what might work and therefore not necessarily out of tune with this idea of margin improvement and buy backs. >> analysts were very encouraged by this move it shows willingness by management that they didn't anticipate to take more aggressive steps >> what will it be you talk often about we both do about consolidation. >> delivery start up they took a small stake this is the world's biggest food company they could be -- >> by the way could borrow at virtually zero anything they do would be creative because of the borrowing costs being so low and he's focused on loreal saying it
doesn't make sense to hold this significant stake if they were to monetize that in some fashion it would give them a good deal of capital to deploy elsewhere it's going to be interesting to watch. >> they're frozing and sweets. >> >> it is the recent losers. you have the trade of selling the winners to buy the users and underarmour and also insurers actually a very strong part of financials and lincoln financial, lincoln national and that's been a theme out there. out of growth and the value at least for now. >> dow is up 100 every component was green. apple and microsoft tag into the red. amazon largely effected by the tweets but it reminded us of something on the campaign trail
about am zonk. listen to this. >> i have respect for jeff besos but he bought the washington post to have political influence and have to tell you, we have a different country than we used to have. we have a different -- he owns amazon he wants political influence so that amazon will benefit from it that's not right and believe me if i become president, oh do they have problems they're going to have such problems >> of course it refers to the amazon washington post yesterday the post did a story about a cover of time hah the post reports is fraudulent. >> literally fake news. >> is that embarrassing? is this pay back for that story? impossible to know. >> they have a lot of critical takes about the health care bill that got delayed and exposes some risks within the republican
party. >> it's about internet tax that i would assume they were not paying sales tax is no longer the case amazon has been collecting sales taxes on purchases in the last four states where it wasn't doing so and this was back from march. so they collect sales tax at every state in the country 50 of them by the way, still you know, i think the argument he might want to make if he wants to antagonize mr. besos is one starting to hear more and more about monopoly powered amazon it's about 50 some odd pages piece on amazon's anti-trust pair dock arguing that amazon's dominance primarily through output, underappreciates the risk of predatory pricing and now integration across business lines may prove anti-com
anti-competitive. >> they're going to bring prices down and leave them as the only provider at which point they have complete power to do the opposite. >> we're used to consolidation being inflationary what happens when it's deflation nary. >> it helps the consumer but hurts competition. and bundling is often the problem. look at what prime is. could you argue that bundling and streaming video with prime is somehow an unfair advantage when you're talking about competition with netflix. >> these are issues that the european regulators are looking into and the woman we spoke to yesterday going after google for these kind of competition practices which you're not getting and the person that the trump administration put in charge of this and i think is still going through committee and everything is supposedly very pro business. you put in place the fcc so i wonder if this is going to be an issue. the only other thing i would add is there's been this conspiracy
theory that besos bought the post as a way to influence political opinion and tax policy and everything else that effects them so this absolutely jive with that part of the base that feels this way whether these are just threats or whether he could take action about it i wonder, we have a brief discussion at one point about whole foods and amazon and there wl there were any regulatory risks around that. whether that could be a risk here. >> i don't know but i know that this argument of structure dominance is not going to go away it's going to be magnified by the whole foods deal but this argument is starting to be made and certainly in academic circles and it will be interesting to watch. >> the rye ronny is if president trump gets his way it really helps amazon they have a lot of cash overseas. >> some. they don't have a lot. >> they don't have as much they don't have as much
overseas. >> it's net positive. >> it's a net positive in general. >> let's get to washington with some news on samsung good morning. >> open a factory in south carolina to build appliances here in america for the first time the companies plans said that it will invest $380 million in this project and create 954 jobs by 2020 the commerce secretary was scheduled to join executives in washington this morning for a private signing ceremony of this deal there will be an announcement in south carolina later on this afternoon. now this all comes aday ahead of the visit by south korea's president. the white house is calling it's relationship with south korea ironclad and president trump and president moon are expected to talk about economic issues as well as a threat from north korea. we'll bring you more as we have it. >> thank you for that.
dow s'up 99. let's get to bob on the floor. good morning. >> good morning, carl, happy wednesday. what a nice start. 6-1 advancing at the new york stock exchange banks are up stabilizing recently and this happens this time of year. it's nice. retailers also on the plus side, semi-conductors bouncing and industrials also modest bounce there. we have been talking about these results and hope you tune in 4:30 eastern time to get the results. what we're waiting for is so see what banks get to increase their dividends or buy back more stock. jp morgan there's a lot of notes out this morning the average dividend growth is 16% and they're talking about dividend increases in some cases substantial. bank of america, the citigroup, all may have substantial increases in their dividend. we'll see about that the key point is that bank stocks generally have done better after the results it wouldn't be xlf, major bank etf here
they tend to bottom around the results. a number of people noted that i wouldn't be surprise first degree banks rose modestly in the next couple of weeks that's the etf for that. meantime over in europe, you guys were talking about the fact that euro took a hit on some stories out there sthag the market was mispricing or sbis rupting mr. draghi's space it's mr. draghi that has the problem. he says reinflationary forces are in space he said inflation is still more muted than expected. which is it? he's talking out of both sides essentially here market shows the focus on the new news on the reinflationary story but you can't come back and say you're misinterrupting and don't understand me. get the story straighter here. meantime t banks in europe were up yesterday and they're still up today and all the stocks to
the upside meanwhile, hope you heard us talking earlier about the ipo front, blue apron cutting the size of their deal quite substantially from 15 to 17. we discussed some of the issues that were going on here but the important thing is instead of 480 million raised they're going to raise 315 so the funding round looks like it's on the down side. about $2 billion they're going to raise overall the last market cap they had and the last round of funding was 2.2 billion so this may be a down round of funding, a real shot for other companies looking to go public we talked about the issue of tlosz that were out there. the come pet tors, hello fresh some of the other ones in particular amazon that's out tland of course instarting rotation cart has a investment from whole foods and the question is what happens there the point here is the line between grocery deliveries and meal delivery is not a very big one. the moat is not very wide.
that was the primary issue here. also another big ipo going to try to price tonight over on the nasdaq sits enterprise storages they help more effectively manage their cloud applications. they had a down round of funding too. their ipo numbers are basically lower than their last round evaluations as well. so here's the issue, if you're an investor in ipo you should be very happy do you want to buy blue apron at $11 or $16 you want to buy it at the lower price and investors have been pushing back on high valuation and they have been getting lower prices and this has helped the after market business. this is the basket of the last 60 stocks or so it's up nearly 20% this year. why? they have gotten lower prices. if you're an issuer you're not happy about lowering prices but if you're a buyer of ipo, most of the people are going to be a lot more happy and of course
this means investors are not going to be paying higher taxes. thank you. let's head to the bond pitts now. good morning. >> you know, it's getting hot in here and maybe the water sboiling a little bit but we don't notice mario draghi they could walk it back there's no stencil for it. comments are made probably based on real thoughts to some extent they all start to reverse the balance sheet
expansion. now if you look at tens you can see it's had some volatility but the one week chart shows the take backs to these moves isn't real as a matter of fact right now as we sit they're up one and three. so these moves are on their own so the markets are starting to think about the process and it understands there's going to be walk backs but that doesn't mean there's going to be policy walk backs because there's an intersection where the road ends and something is going to have to be done you can look at one week of bunds. they're not moving up as much as they were but the escalation is real and set in. it's clearly a change of direction here and it shows about the last time we were here yes the curve steepened a little bit yesterday and today but flattening, steepening and how
you equate that to recession and all the economic formulas in the past good luck with that. carl back to you. >> rick thank you for that we are going to watch oil. not moving much at the moment but we'll see what happens in about 40 minutes jackie is at the commodity desk. >> as you said bouncing around the flat line this morning include oil and gasoline the market was looking for drugs across the board this is an issue because consensus is that demand is strong that production and demand wer coming back in mind this summer. if the doe confirms the bills that would poke holes in the theory aaa saying a record number of travellers, 44.2 million will venture out for the holiday. that's more than a million more than last year taking advantage of the lower gas prices no doubt and we have been saying for the last few weeks that prices can go even lower even despite the short-term bond wes have seen. tell megathat they still feel
maybe you wait until next week carl back to you. >> jackie thank you very much. when we come back a new chapter for gm and the autonomous vehicle wars multibillion dollar investment pay off? dow up 92. nice day for financials on pace thr best day since june 9th up three days in a row (baby crying) ♪ minutes old. ♪ a baby's skin is never more delicate. ♪ what do hospitals use to wash and protect it? ♪
gm is upping the ante in the autonomous vehicles race finally launching it's super cruise control system in a new cadillac phil has more on that. morning, phil. >> good morning. this is the new ct 6 with super cruise let me show you what makes this system different than other drive system technology out there now. the biggest difference up here on top of the steering column it's a very small cam rachlt let me show you how it works when we tested it out yesterday driving north on highway 280 the system is is only operable
on a highway it lets you go hands free once you hit the buttons and it's easy to use but what is different is because of that camera if you look away for more than 3, 4, 5 seconds or if you doze off, if you close your eyes and yes we tested that out yesterday, then the steering wheel will flash and there will be an audio alert saying you must take control of the car if you continue to ignore those warnings, which could happen, eventually the hazard flashers would come on, the system will slow down the vehicle and what will ultimately happen is that the vehicle will come to a stop and an on star operator will reach out to you the big question is whether or not this is a game changer for cadillac is this the type of technology that people will say i like it i like having a vehicle watching me to make sure that i'm not too distracted behind the wheel. we'll have a chance to talk to the head of cadillac later on this morning
he's going to be driving the system showing us super cruise live on squawk on the street you don't want to miss that interview guys this is a system that cadillac and general motors invested a large amount of money and a lot of time developing it's easy to use the big question is whether or not buyers will look at this as a game changer and say i want that cadillac instead of the tesla or bmw, mercedes, et cetera. >> this morning we were talking about morgan stanley resuming coverage of gm with an overweight $40 target. part of the thesis is that the company in their words still has key cards when it comes to technology is this a piece of that? >> absolutely. yes, this is a piece of that the technology that gm is developing i talked to people in the industry and they say look it's some of the best technology that's out there we just haven't seen it implemented or introduced to the public this is the beginning of that
and you'll see more of this coming out in the months ahead from general motors. >> fascinating work on super cruise control we'll talk to you soon thanks a lot when we come back, lion tree founder and ceo will join us talking some mna dow with a steady pattern at the open we're back after a break your insurance company
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take a look at the markets this morning good action and financials today. that's supporting the dow up 95 points or so keeping an eye on the nasdaq working back to the flat line though and oil inventories in 30 minutes. >> our road map for the hour begins with trump versus besos the president takes to twitter blasting amazon. live report from the white house straight ahead. >> health care delayed senate republicans postponing their vote on the obama replacement bill we have the latest. >> hackers hitting companies across the globe in the second
massive attack in just as many months the details for you straight ahead but we do have data on housing. >> sales in may down 0.8% month to month down 1.7% year over year that's the third straight monthly drop and that's the second straight annual drop and it has the realtors saying that sales may have topped off for the year pending home sales are contracts signed in may that has people out shopping for homes closing in june or july. they're squarely on what they call a supply situation. and may be hurting the decision to buy also higher home prices put by these critically lower supplies more kbaj applications also fell this week showing we're not going to expect much more going forward.
we generally see it. and construction down 4.5% year over year now they gain after too much and you can tell this housing market is really weakening with a severe lack of homes per sale. >> this time aman and amazon owners jeff besos owns the washington post. the president saying the amazon washington post sometimes referred to as the guardian of amazon not as they should. and what the washington post did exactly that had the president so grumpy this morning
and washington post saying the time magazine cover it's fake. we have a look at that actual cover there. there we go. that's the cover in various golf clubs around the world and put it up in the golf club this apparently has headlines saying how great donald trump's show the apprentice was doing. it's possibly that story and critical washington vote and amazon and going back to the campaign in february of 2015 here's what he said at that time >> he bought the washington post
and we have a different country than we used to have he owns amazon he wants political influence and that's not right and believe me, if i become president, oh do they have problems they're going to have such problems >> that was well received by the audience and the crowd will see if the white house says what the president intends to do in terms of additional taxes for amazon does he plan on taking action kbens that company today it's possible that he is reacting this morning and says the trump organization faked a cover of time magazine and hung it in his golf club. >> aman wasn't it just last week that besos was at the white house? >> that's right. he was just here a lot of those just two seats away from the president there and you've got the president,
microsoft and amazon there in that picture it afreers the images that we saw to be a productive exchange. of course we did see that now famous photo of all the tech ceos sitting next to the president. all of them looking glum the industry as a whole is not one that supported the president. gold miners tend to look happy and tech ceos tend to look glum. >> thank you let's bring in robert frank for more on the tax angle here anyway to fully fact check what the spt alleging here about amazon. >> there's certainly an element of truth that then gets blown a little out of proportion now what is interesting about besos is he is very close to becoming the richest man in the world that's going to make him a target not just for trump but for other people look at what he's doing with his wealth and what amazon is doing as a company. bill gates as soon as he became the richest man back in 1995,
that's when microsoft started to face a lot of its antitrust problems so this is going to be an overhang for be so, s and amazon and trump is right, amazon has been very aggressive on tax policy. between 2007 and last year, amazon's total cash tax rate that's all the taxes they pay, local, state, federal were 13% the average was more than twice that and the way amazon has done that is through a special arrangement in europe where a lot of their profits flowed through that's been unwound a bit so they're not getting the same benefits as the mid 2000s and a lot of their early success was because they didn't pay state sales taxes in a lot of states that's now changed where a majority of states, certainly the vast majority of amazon
sales go through state where is they do pay sales taxes. they had a low tax rate for years. bezos is aggressive when it comes to tax policy and paying taxes but they're paying more now and we'll see this year, next year, maybe deliberately that they're going to pay a higher tax rate just to show it's not an unfair advantage but the big theme here is that is amazon getting too powerful? and that's an angle trump is going to hit when they get closer with the whole foods deal regulatory approval is going to be an issue. >> you know robert, i'm glad you brought up the corporate tax rate they pay where they have been very aggressive and then of course the state sales tax which now they are paying. when amazon is the seller of the goods. it's also important to mention though, 3rd parties use the amazon platform and it's my understanding that when a third party seller, you're buying from a third party seller, you are often not paying sales tax
because that third party seller does not have a presence there so there's still an advantage to amazon gained through third party sellers that are able to not charge, even though they should be able to charge sales tax to buyers in particular states. >> from their fcc filing we support a federal law that would allow states to require sales tax collections by remote sellers under a nationwide system. >> right and trump specifically said that amazon gets tax break with sales taxes that department stores don't so amazon is therefore putting them out of business and i think as we start to understand how amazon works and these third party serls i think states will start to close these loopholes but sure, relative to the average retailer, brick and mortar retailer in your average town amazon plays a lower rate. another thing worth pointing out that is worth highlighting the washington post is not owned by
amazon it's owned by jeff bezos and it does make a profit so it doesn't even help him lower his tax rate. >> good point. thank you. >> thank you >> should amazon feel threatened here tlnchts is a long way from here to there in terms of tax reform in general that would potentially impact amazon so i they, you know, all company versus realized that they might be in the review and i think
health care is just how long tax reform could take. it's going to be long from here to there so no threat from amazon's perspective. >> when it comes to taxes doug i wonder what about the anti-trust issue. president trump has gone after amazon saying that they do have an anti-trust problem a huge anti-trust problem and if he becomes president they're going to have problems, believe me. >> yeah it will be interesting to see if he pursues that. we have got the europeans being very active. we saw google get going and they have been really pretty aggressive with the tech industry and that's true of the u.s. regulators. it will be interesting to see if it does change one of the interesting things is there's been a long battle with no resolution between the electronic sellers and brick and mortar retailers about how to collect sales taxes and if the president really weighs in on behalf of the brick and mortar
guys to make sure that they pay exactly the same taxes that would be a real shift in the ground on that particular debate. >> what about other regulatory risks? amazon is going to have to push this whole foods deal, $14 billion. there could be a risk there. i think of also the recent bashing of cnn nothing new but it has heated up at a time when time warner is trying to get it's deal done or at&t is trying to get it's deal done with time warner. >> the president because of our checks and balances has some what limited authority and on some of the things that we're talking about of course in terms of regulatory changes he can do things unilaterally through the regulatory bodies however the regulatory regulation moves slowly in washington and some of the things that matter to us as bond investors or financial regulations will be predicated on getting the folks into those agencies and because there's been a slow rate of staffing up
across the administration that's also going to be slow going so yes regulatory threats in general are probably more likely, more possible but again predicated on getting the right political people in those spots. >> let's head on that flow moving health care legislation do you see a path, knowing the republican point of view and knowing how the math and the economics work, do you see a path to getting the republican votes for the senate health care bill after a few weeks of pushing and some compromises from mitch mcconnell. >> this is like the situation in the house of representatives it's not just a policy issue certainly there's some tweets. i think more funds for opioid treatment are probably on the table but it's the larger issue of will they deliver on a political promise and repeal the affordable care act.
those kinds of considerations. the politics need to sink in with the senators than they did in the house and ultimately the house divided out and i think there's a real path for the senate to do the same thing. >> libby what does that do to the time line here how far do you push that out if you do expect it to pass both the senate and the house and what does it mean for tax reform. >> on health care we may be more sceptical of course there say much thinner margin in the senate than in the house in terms of republican majority and they can only afford to lose two votes in the senate and one of the reasons why they had to pull the senate vote this week so if anybody can pull arab bit out of a hat it's mitch mcconnell but it's going to be very difficult. in terms of health care and in terms of tax reform, momentum in
washington so if health care does fail i do think this could be an impetment to psychologically advance tax reform and as you all might know you have to pass the fiscal year budget to set up reconciliation to set up tax reform to a long way from here to there our best case scenario is we see something, 2018 but chances of that slipping are actually increasing >> wow so it's the case that we won't get health care or tax reform this year. >> we've always been sceptical that you'll see any real pro growth policies in 2017 and health care, tax reform, we won't likely see it until 2018 because in the realities of policy making and legislating. >> thank you. >> the important thing on this that's exactly right. >> final. >> you agree on the time line doug. >> oh yeah and i think the key decision is
when they come back, suppose they're in trouble on the health care bill which i acknowledge is a real possibility, do they give up and then move the tax reform, cut their losses on health care and move on? that's the key decision. >> we will see thank you for joining us today. >> thank you head of public policy. and former cbo director. >> when we come back, companies trying to recover after yesterday's massive sign area tablg. tech stocks taking a hit closer look at the sector. and the ceo and founder will oc cseo stkslo tsession highs here dow is up 118. veted. their leadership is instinctive. they're experts in things you haven't heard of. researchers of technologies that one day you will. some call them the best of the best. some call them veterans. we call them our team.
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companies struggling to recover this morning from yesterday's cyberattack. begs the question do companies need to prepare for the new normal we're joined this morning by chief information security officer and adam meyers vice president of intelligence. good to see you both phil can you talk us through, it seemed like the other day we were trying to get through this where what are the similarities and differences? >> sure. it represents the first time that they combined ransom wear and the ability to traed across a network autonomously
this particular new game adds the new feature of not only encrypting files but actually bricking your computer so it cannot be used for any purpose at all as opposed to the feature primarily to not give you access to your files. >> adam s any patches that were put in place post wanna cry, did that make this one less dramatic or effective >> i think patches that came post wanna cry, this malware could dump credentials it could take the user names and passwords out and use that as well even if the system was patched with the patch for the wanna cry vulnerability it still would have been able to spread. >> adam, these nsa tools that were shared by i think it's the shadow brokers that seem to be
apart of some of these attacks give me your sense here as to how or what your expectations are in terms of the attacks ramping up and are you guys in this community on code red >> we're on a high state of alert looking at any related to shadow brokers they just had more information come out just yesterday. today time frame and we're keeping a pretty close eye on that because when they release those exploits they're in the public domain. criminal actors and other bad guys can pick up the exploits and use them for various purposes >> looking for similarities in the victims we have private sector entities, government entities, companies in the states, we have victims in europe do they have anything in common? can speak start to determine whether or not they're more at risk than not? >> i think so. >> well, i think in this -- >> phil. >> i think so.
what they all have in common is they are using software that has vulnerabilities where a patch is, in fact, been released by the vendor of the software what they have in common is they haven't patched their software so they're open to this. some of these stris toend use older version of the software so that makes them especially susceptible to it. >> adam, does bitcoin make them more susceptible should something be done about the fact that they're all demanding this hard to trace digital currency that's in the dark shadow of the web >> there's lots of other options. i think the problem yesterday that was interesting was that the e-mail companies that was listed in the e-mail account where you were supposed to contact with your ransom payment cut shut down the account. anybody that tried to pay the ransom after that e-mail account was shut off had no way to even
pay it so there's lots of pieces to this bitcoin is one element but there's others currencies that could be used in it's place. there's a number of different problem address lated to ransomware that we as an industry are taking a hard look at to try to help our customers. >> finally, phil, we ask the question at the top of the segment do companies need to prepare for a new normal kind of thought we were already in the new normal. does this elevate that concern in anyway, for the long-term >> right we have a saying that said you don't bring a knife to a gun fight and what we mean is that if you want to take on the problems, the cyber security problem what you need to do is you need to embrace fabric based solutions of automation and integration but better yet, why don't youjust avoid the gun fight completely by patching your system and using good practices when you see emails. resist that temptation to click on that e-mail attachment.
>> people starting to get the hang of that to some degree. thank you so much for your time. good to see you. >> thank you. >> thank you. >> well, the president this morning going after one of the largest companies in the united states amazon he tweeted that amazon washington post sometimes referred to as the guardian of amazon not paying internet taxes which they should. it's fake news you can all try to make sense of it as we have tried to perhaps in reference to the fact that amazon at one point at least on its own merchandise did not always have consumers pay sales tax but it does now in the 45 states that have the sales tax in this country. let's get more on the potential impact on the company. >> nice to have you here. >> worked out real well. if you're jeff bezos and you see this tweet, what do you sense he's thinking if anything and should he be concerned
>> it's a personal thing this is clear. even though donald trump tweets an encrypted language when you break through it this is all about him and his vendetta against the washington post. washington post owned by bezos the gravy train is amazon so you can connect the dots and attend of the day that's what trump is trying to do is undermine the credibility of washington post. >> and we have from february of '16 of course he famously, presidential candidate trump then attacked bezos and the post saying they have real trouble if i win but bezos was two people away from him recently, last week i think at the white house. do you think b zerks os has something to be worried about here >> no, i think he's just going to double down and, you know, we know the number of reporters at the washington post that are doing a lot of work on trump and trying to shed light on his other side and so i don't think
he has anything to worry about i think this tax piece like you mentioned 45 states already record that tax and i think partly too just on that, bezos is going to care if this impacts amazon's business and attend of the day everyone knows that this increases the sales tax is coming those that already collected sales tax when they start collecting it it does not van impact on the unit growth. it's been pretty steady at 25% and so at the end of the day bezos doesn't have anything to worry about. it's great theater though. >> does that mean shareholders of amazon don't have anything to worry about? >> i don't think they do there's going to be sales tax. investors know it. i think that if there's going to be something more sinister that donald trump could do to amazon that would have much broader impacts on broader tech and he's just not going to do that. >> because >> he's not going to do it because tech is such an
important part of our economy and it would be shortsighted for him to do that it makes sense to go after the washington post because of how he feels about that. >> there's been this argument starting to be made after the whole foods announcement about amazon's monoply power the fact that they can drive so many competitors out of the business yale law, big piece about it should that be a concern >> there could be something that would emerge around that it's the fact that about 20% of what is bought online in the u.s. is bought through amazon and gets to a point where there's large market share that could come under greater scrutiny f. that did happen, if there was something that they could do that trump could do around pricing that something that investors of amazon would be concerned about i think that's unlikely but that's something that they would be concerned about. >> gene thanks for stopping by. >> thank you great to be here.
>> day 3 of the fraud trial. meg is back at hq with the latest after some drama yesterday on jury selection. >> that's right. that jury selection process is continuing the judge actually brought in a whole new group of potential jurors to try to add to it and went down into 12 jurors and 6 alternates that process is continuing he arrived for day three of the fraud trial this morning along with his attorney. we were able to catch up with him as they were leaving the courthouse yesterday asking are you surprised this jury selection process is taking so long he said no it's tiring but we have been through this before. there was some drama yesterday azarenka he asked for a mistrial citing media coverage of the jury selection process some came into the courthouse with we heard from legal experts that really set them up potentially
underway to then appeal on that basis at the end but essentially if you have a pool of jurors that's coming back this afternoon, they're going to add to that. and make the argument early tomorrow morning lots of drama continuing the trial. >> what a story although it's good to have you back indoors. meg back at hq where he's putting money to work, the future of deal making otd media technology and a l more we're back after a quick break you always pay
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hour the newly appointed ambassador to china making his first public appearance since arriving earlier this week. he told reporters there's a pressing need to work together with china. >> we recognize that it's an important relationship between the two greatest economic powers in the world the united states and the peoples republic of china and we
need to work together to deal with some of the pressing difficult issues such as the threat from north korea. >> back here at home, two csx railroad workers were killed when they were hit by an amtrak train approaching the station in washington amtrak says service will be temporarily suspended between d.c. and philadelphia this morning while that accident is being investigated. >> evacuation orders in arizona are being expanded as the wildfire continues to burn some 18,000 acres have already been scorched and as of last night only 1% of the fire had been contain contained. >> thank you so much you can see oil prices are bouncing around not sure what to make of the numbers out of the department of energy we have 118,000 barrels so that's less than the api last night but still not a draw like
traders were look for. the gasoline number was more supportive we had a draw down of 894,000 barrels this is a very mixed report telling us we have more crude which is something traders have been watching closely they want to see the summer driving demand is there and it is at this point last week we came close to the 5 year average in total gasoline inventories. this is probably enough to take us under that level. makes traders feel better about when where we are in total stock. let's see how it shakes out carl barks to you. >> jackie, thank you we'll watch that as we move on here meanwhile dynamics of the media and tech industry is rapidly changing from apple and facebook's efforts to original content to possible telecon deals this year. we're joined by the founder and ceo of investment bank advisers. >> thank you for having me. >> people are saying we mention apple and facebook
you have time warn we are deals. this valuation are we in a new landscape all of a sudden >> for sure. i'm sure you have been talking about it for sometime now. but we're now at a point where there's a positioning happening which is a good time to do that given the fact that the markets are strong and ipo markets have opened and obviously private market valuations are high so it's a good time to reposition and consolidate and establish business models. some for deals but also just investing in talent. investing in new models. last week in cannes he rolled out his new model for short form premium content which is a new way of thinking about shows like game of thrones. so it is confirmation but also opportunity. >> should we look for incremental deals? a couple of executives here or partnership there or do you see a landmark historic jump into the water? >> it's much more of a landmark
move in my mind. i don't think we're in the incremental zone anymore we're in the pandora's box and digital consumer market and every media company trying to find new ways to approach that consumer that's what digital media is all about. how we reengage that consumer. let's go to politics how do we reengage the populous in a new way. >> you got my attention. you're talk repositioning and saying it's a big moment here. at&t and time warner comes to mind as one transaction but are you talking about the apples of the world doing something that would be unexpected in a sense and others amazon or others like that buying media assets or is it different. >> the way you're commenting on the meeting is a bit of a dripping mentality of incrementalizing these trends but taking a step back, it's only a matter of time before
they become much more material so right now we have time warner for example at&t and content assets of sale that are still left that will solve itself in my mind over the next few year where is no longer will the independent content company on their own of scale married with distribution or technology or get more geographic scales themselves. >> you see this taking place the next three dwleers we have been talking about for many, many years. >> i do. not just on the content side but distributors like at&t and verizon and all have a unique position and moment to realign themselves because they have a foot in the models of the existing model and they have a foot in the direct to consumer distribution model and a lot of power and leverage along the way which is their moment and the future they think about the
content. >> what gets everybody there if they have the confidence to make those kind of moves. >> if you're verizon first can't quite get that done then maybe you think about content and it's not clear at all what the strategy should be and if you're apple for example having extraordinary success do you go about doing something that could culturally be that. >> but again without specific situatio situations, i would say it's about how do you engage fundamentally with your consumers these are consumer driven businesses. we use at&t and carter and comcast and how do you service that customer in a different way without going through the traditional ecosystem? and a media model but also a huge opportunity for that consumer and tuns data and the measure blt of those me tricks like cpm and advertising or et cetera that's what you're seeing but i think now moving is is a huge
opportunity and there's an urgency there. >> what is the easier way to go right now? being a data company that wants to be a creator or the traditional content creator that wants data. >> i think the platforms are a bit of a transition medium meaning the definition of media is simply stated the creation of content is attributed through technology now technology can be newspapers, broadcasting but now it could be amazon, facebook, snap, et cetera. the technology platform shifts and have a lot of power but really what interesting on media is the creation of content and how you distribute it. >> historic deal in the past and i'm thinking of one that was close to home but was there one that saw this coming before anyone else? >> there's a number of different deals approaching it that way.
that's where it is interesting att doing time warner. >> you can't compare those two one is giant and the other one is taking incremental small steps. >> i think it more indicates the boldness and experimentation philosophy now because there's no linear solution for how you get there. they're going to from v to try different things and i don't think other companies are doing it that way. so i think the landscape shifts because again there are very few assets to acquire and then after that it's all about developing this. >> we had robert on this morning and he said there is prices high and there's tax uncertainty, regulatory uncertainty and stocks are doing okay. maybe some ceos don't feel the urge to buy something because their stocks are fine for now. >> technology m&a is at the
highest level since 2014 also return to the ipo market so in some cases it's more of an option than a year ago deals are never easy to get done and there is some tension between buyers and sellers but we're busy we have transactions on the pipeline right now some of that is coverage and we were right here at the end. >> people may not know you also buying on deals and i know as well to carl's point are you finding it. >> we're selective obviously most of what we do is strategic. not only in the u.s. but if you
mention, we optimize that trade and the deal in europe they also have growth and we invested recentlyin the larges ott platform that quadrupled this last year all sports direct to consumer. fox is invested. we have invested and there's something called wind view that has a second screen technology so we are doing some investing at the earlier stage. >> drone racing? >> yeah, there's drone racing we invested in along side liberty. >> finally, five years old, everybody bringing on to talk about media but do you ever think about is the firm going to expand beyond that do you consider that or do you feel you need to be focused? >> we're happy to be here and to be on the show and we're happy to be around the fact that the landscape hit
the timing of the disruption at the time we hit the firm and also finding interesting investment opportunities we also launched this podcast where we try to bring guests that we think are entrepreneur industries and show them a little bit about how the industry is involved. >> you host it >> yes. >> >> i see, yes. >> congrats on five years. >> thank you thank you for having me. >> as we head to break, taking a look at shares of general mills. beating on the top and bottom line the stock is up almost 2%. company also raises quarterly dividends to 49 cents per share to 48. keep an eye on this market pretty broad based rally stay with us on squawk on the
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liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance. i'd like to welcome my health care guy. what a great day to have your health care guy. bob thanks for taking the time. >> you're welcome. good to see you. my kids love to clip coupons and they get great deals and they're amazed at how few coupons for great deals are ever used which allows people issuing them to give them good deals
isn't the obamacare and any future legislation poison because many people eligible for coupons aren't redeeming them. >> the fundamental problem with obamacare is not enough people, not enough healthy people have signed up to pay the claim for the sick health insurance 101 is simply a relatively small number of sick people in a pool but the potential for many more healthy people to come in and put their premiums in and be able to pay the claim so the fundamental problem with obamacare is we haven't had enough people sign up the problem with the republican plan is they could be making the same mistake and while they phase these 10 million into the individual health insurance market they
give them lousy benefits just as obamacare does with very high deductibles. a person making $12,000 a year that's 100% of the federal poverty level with the eligible and republican plan for a very low cost health insurance plan but probably with about a $7,000 deductible these people would tend not to buy it so what we would have likely with the republican plan is what we have with the democratic plan today not enough people buying in central bankers and how the money went into stock buy backs and it's difficult to model human behavior under a variety of circumstances is that not also the case here like you said and i want to repeat it, 40% of those eligible did not sign up for subsidies
under obamacare. it's hard to predict human behavior. >> it is but we have in the health insurance industry an extraordinary amount of experience getting people to sign up for health insurance plans and making them work drug plan is a government run plan it's very popular among seen yors the vast majority of seniors sign up. they pay a relatively small premium and get a relatively small benefit about equal to their premium and they sign up approximate because it's a catastrophic health insurance plan with a nice benefit on the front end so we know how to model plans that people will sign up for. and in the individual health insurance market the problem with obamacare is it doesn't give product managers enough flexibility to meet the customers needs and if you give
too much flexibility in the market people need to be protected. they are so protected now they have ambulance they don't empty there are trillions of dollars available through obamacare throughout the coming decades to help subsidize health plans. and they are more efficiently used and we can create plans that people want to purchase it is possible >> excellent bob, it's a complicated topic. it's hard to get to the bottom of it. you always help in that endeavor thank you, again carl, back to you. rick santelli, thank you the nyse press was short-selling yesterday. take a listen. >> it almost feels kind of icky and un-american, you're betting against an american company.
but the reality is you are allowing short-selling in the economy that is good for capital formation, to tighten spreads and allocates capital to the right moment in time so the real issue that our listed companies have is about short-selling. in fact, very infrequently do i have a company that says it should be banned in its entirety what they say is it should have more transparency. >> we have heard the same kind of message from nasdaq executives as well they, of course, host a lot of the companies on their exchanges and are courting ipos. now to john with a look at what is coming up on "squawk alley. if you smell something, it could be the ipo with their chance to salvage this meal. we'll dig into that. and a review of the amazon echo show. the one with the touchscreen we'll see if that is good as we continue to cover the hack attacks. all that and more coming up on "squawk alley.
unchts ups is announcing they are freezing pensions for many non-union workers. morgan brennan has more. >> reporter: they will freeze pensions for thousands of staffers starting in 2023. instead, they will offer 401(k) plans and contribute to the accounts beyond the employee savings match. this affects 17% of the staff, but it speaks to a bigger trend in corporate america right now ballooning pension liabilities and employers efforts to quell them so ups had nearly a $10 billion pension deficit last year.
and according to mercer, the combined shortfall of the companies was a shortfall come april. why? tighter regulations, longer life spans and many companies are choosing to invest the additional capital they have in other ways, like stock buy-backs. so in light of this, more employers are freezing their traditional pensions, they're shifting to hybrid pensions and defying contribution plans like 401(k)s. willis watson says from 2015 the percentage of fortune 500 companies fell from 50% to 20% and 39% had frozen pension plan altogether so ups argues this creates a more predictable retirement expense. and for many employers that have also done this, including general motors, united technologies and just last week freezing pension plans has enabled them to then offload the obligations and the risk
associated with them through insurers like prudential financial, metlife and aig it is creating a source of growth for those companies, which have also been impacted by a low rate environment so this is quite an interesting chain of events. guys >> morgan, interesting story thank you very much, morgan brennan back at hq the u.s. is set to announce enhanced security measures for arriving international flights and they reportedly do not include immediately expanding that ban on laptop computers reuters is reporting that airports could avoid a laptop ban if they meet the new enhanced security requirements when we come back, more on the president going after amazon and jeff bezos seiohis.lo tp 122, cseo ssn gh
welcome back to "squawk on the street." financia financials are rallying on the back of banks like bank of america. that does it for this hour of "squawk on the street. we'll head back downtown for the start of "squawk alley." over to you guys good morning it is 8:00 a.m. at amazon headquarters in seattle. 11:00 a.m. on wall street. and "squawk alley" is live ♪ ♪